Rental Homes in Bankruptcy

You  might not suspect that investment properties have troubles with mortgage debt or foreclosure, but there are plenty of cases where this is true. A sinking housing market and challenging economic times can lead even the most savvy investor into financial troubles. When an investment property becomes part of a Dallas bankruptcy case, both the owner and the renter can be affected.

The Landlord

Owning a distressed property is tough. For one, many mortgage lenders are not willing to offer foreclosure alternatives to properties that are used for renting. This leaves the owner of the property with limited options. They can attempt to continue negotiations with lenders or they can file for bankruptcy in order to halt the foreclosure process. In order to keep the home out of foreclosure, the owner will need to maintain payments to resolve their mortgage debts. Further, the income gained from renting the unit can be seized and used to satisfy mortgage debt payments towards the house until resolved.

The Renter

Renting a distressed property can be tricky. The renter may have  no knowledge that the property is even at risk of foreclosure until the process has already begun. This could mean that the renter has as little as 30 days to vacate the property. If the owner works towards resolving the debt on the property, the renter should be able to stay. However, the future of the renter’s occupation of the home rests solely in the hands of the landlord/owner.